Operations

Lowe’s Agrees to $6.5 Million Settlement in CA Employment Case

Retailer accused of treating independent contractors as employees without benefits

Lowe’s will pay $6.5 million to settle a class-action suit
in California that alleged the nation’s No. 2 home improvement retailer treated
independent contractors like company employees without giving them any of the
benefits.

The $6.5 million—roughly 20% of what Lowe’s might have paid
had the case gone to trial—will be shared with anyone who performed at least
one installation job for Lowe’s in California from June 2008 through last week,
when the proposed settlement was entered into the U.S. District Court for the Northern
District of California. Approximately 4,029 individual installers and 949
installation companies will be eligible to get the payments, and the maximum
payment anyone can get in the settlement is roughly $1,613, a court document
stated.

The agreement ends a nearly two-year-old legal fight that
began when Ronald Shephard and Henry Romines filed suit in state court
arguing that Lowe’s violated California labor law in using them to install
garage doors from 1995 to 2009. The two argued that they shouldn’t be regarded
as independent contractors because they said Lowe’s controlled all aspects of
all their work. They said that control included where and when Shephard and
Romines did jobs, how they were to dress (in shirts and hats with the Lowe’s
logo), how they should describe themselves (as Lowe’s employees), how they got
compensated (the customers paid Lowe’s, which in turn wrote a check), and whether they
could do extra work for the customer on their own (they couldn’t). The plaintiffs also noted
that their official status as independent contractors meant they weren’t
entitled to overtime pay; vacation, holiday, or sick pay; and health care and
other insurances that were part of Lowe’s benefits.

Lowe’s got the case transferred from state into
federal court. Romines voluntarily dismissed his claims in February 2013, but
four months later Shephard sought to get the case converted into a class-action
lawsuit. Also last year, a Victorville, Calif.-based installation firm named
Merrill’s Garage Doors Inc. (MGDI), where Shephard worked, was added as a
plaintiff. It was MGDI that contracted with Lowe’s and was paid by the retailer,
who in turn paid Shephard.

Last Aug. 19, the federal court agreed to treat the
case as a class-action lawsuit. A series of technical legal maneuvers ensued,
but in January the two sides also went to a mediator. They emerged with the foundations
of the agreement presented to the federal court on Friday, May 23.

The plaintiffs’ motion for a settlement continued to stress
their belief they could prove that Lowe’s misclassified Shephard and harmed MGDI.
But they also recognized that Lowe’s would fight back, saying Lowe's would assert that “each
installation company operated their own separate business, hired their own
employees, paid their employee’s wages and benefits and made all decisions
relating to employment matters and issues … so they could not possible be
deemed employees of Lowe’s.”

The contract between MGDI and Lowe’s “indicates
that all individuals working for MGDI on Lowe’s jobs would be treated as
independent contractors, including plaintiff Shephard,” plaintiffs said in
their amended complaint. “Lowe’s provided MGDI with Form 1099s for all income
received from Lowe’s. Thus, MGDI paid all of the taxes associated with
employing Shephard when Lowe’s should have paid these taxes. Furthermore, Lowe’s
avoided the costs of insuring Shephard and other installers by requiring MGDI
and other installation companies to bear those costs.”

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About the Author

Craig
Webb is editor-in-chief of REMODELING and PROSALES. He has worked as a
professional journalist since 1972 in newsrooms from Indiana to Italy for
leading news organizations such as The Wall Street Journal, United Press
International, McGraw-Hill, and—since 2006—Hanley Wood. Follow him on Twitter at @craiglwebb.